Why They’re Coming and What To Do with Them
Not sure why you got a check in the mail from your insurance company? No, they’re not dropping your coverage. They’re crediting you back for what they overcharged your participants in 2011. Why? Because of health care reform.
Since the Supreme Court decided on the constitutionality of the Affordable Care Act (ACA), we told you about how it might mean additional taxes and regulations for your business. But, the ACA isn’t all bad news for small business owners. In fact, it could get you a check from your insurance company!
Why are Insurance Companies Issuing Rebates?
The ACA imposed new regulations for insurance companies, requiring that they put at least 80 percent of their premiums towards insurance claims. Large group plans (usually 50 or more participants), are now required to put 85 percent toward their claims. The regulations were effective as of January 1, 2011, but not all insurance companies complied with them. Those that didn’t are now being forced to issue rebates to their customers.
If your insurance company issues a rebate, the check will come to your company, but plan participants (employees) will be notified about it. Why are employees being notified? Because part of the money might be for them. If your company pays 100 percent of healthcare costs, then the rebate goes to the company. But, if employees pay for part of the cost, the situation becomes more complicated.
Who Gets the Insurance Rebate?
The rebate should be distributed based on percentage of premiums paid. So, if employees pay for 20 percent of their health coverage, they should receive 20 percent of the rebate. If the amount to be paid to the employees is minimal (generally, under $15), you might consider a way to use the money to benefit the employees, perhaps hosting a luncheon, rather than going through the process of adding $15 to everyone’s next payroll check.
One thing to consider: as these rebates are for plan year 2011, insurance companies issuing rebates need to contact everyone who was a plan participant at any point during 2011, which might include former employees. Consider how you might handle their inquiries about whether they’ll receive rebates.
Contact Rea’s Employee Benefit Plan Professionals
Dealing with the distribution may seem like a bit of a hassle, but at least it’s a hassle caused by funds coming into your company rather than going out! If you have questions about how to process an insurance rebate or how to determine an equitable distribution, contact Rea & Associates. Our Ohio employee benefit plan team will deal with the business of your benefit plans, so you can deal with the business of your business.